Following extensive discussions with its membership and broader user base, the LME has introduced the following package of measures:
The first item of the package is a new rebalanced fee rate for short-dated carries (including "Tom/next" trades) executed by members, effective 1 September 2016.
The LME has concluded that a 44% fee reduction on member short-dated carries should be implemented, bringing the cost down to match the client fee of $0.50 per side (trading and clearing inclusive). This fee is lower than the approximately $0.58 charged prior to the LME's fee changes in 2015.
Secondly, the LME will limit the charges for member and client position transfers, which will enable users to migrate large open positions in order to manage portfolios as efficiently as possible. The average cost for such large position transfers in 2015 was approximately $30,000. Such charges will now be capped at $10,000 per transfer, representing a significant saving for members and their clients.
On the introduction of its new fee schedule in January 2015, the LME committed to review its tariff periodically, which it will continue to do, and these changes are in line with this commitment. The full updated tariff can be found here
Thirdly, LME Clear has designed and will implement a margining methodology, which will reduce the initial margin payable for LME positions, while continuing to provide risk management and market stability. This approach, which remains subject to final regulatory approval, aims to reduce initial margin, in particular for aluminium and copper, and to lower the all-in cost of LME trading for members and their customers.
Finally, the LME has committed to review its suite of incentive programmes. Along with their structured fee schedules, these programmes aim to generate visible liquidity across the curve for members and clients.